Much of Canada’s Energy and Climate Challenge is Local – And so are Many of the Solutions

Introduction – Smart Energy Communities and the Regulatory system

Canada faces several challenges on the energy and climate change front — and they appear to be growing more intractable. We are approaching thirty years from initial agreement on the Framework Convention on Climate Change in Rio in 1992 and the energy and climate discussion in Canada has resulted in, at best, limited action on greenhouse gas emissions while simultaneously generating a great deal of rancor and division and undercutting both consumer and investor confidence.

The trajectory of this debate is hurting Canada in numerous ways which will be familiar to any follower of either traditional or social media. All the while there is a badly underappreciated aspect of the debate which holds promise of changing that trajectory. We call this “Smart Energy Communities.”

Community in this context is intended to mean a geographical, administrative and political entity. In formal legal terms, it can be governed as a municipal unit or under an indigenous authority. It can be anything from a metropolitan entity to a remote or rural community and everything in between.

A “Smart” Energy Community starts by understanding all its energy needs and sources, both external and internal and how those are balanced. The following chart showing energy flows in the Town of Oakville illustrates by example what all Smart Energy Communities take as their starting point. A Smart Energy Community aims to integrate a system-wide understanding of how energy can be used most efficiently with local, renewable, and conventional sources and recognizes that citizens want action to reduce greenhouse gas emissions built on energy fundamentals including safety, reliability, security, resilience and affordability.1 In short, a Smart Energy Community understands the compelling challenge of climate change while recognizing the reality of community energy needs and priorities.

Image 1: Community energy flows2

By shifting the conversation toward Smart Energy Communities we start talking about what matters to Canadians in their day to day lives — more sustainable energy systems, new economic opportunities, improved local environmental quality, more resilient infrastructure, and affordability. This shift has the potential to make energy and climate policy constructive and concrete as opposed to a sometimes abstract, almost always divisive political debate.

For the energy regulatory system, the idea of focusing on Smart Energy Communities has several implications:

It raises numerous questions about how the (mainly downstream) regulatory system functions — most obviously in terms of how distributed energy sources are integrated into and what value they offer to larger, traditional systems. In addition to how local load centers can function as sources; how individual building complexes integrating power, gas and heat systems are to be managed and regulated; how traditional regulated utilities work with new types of energy service providers; and how to enable change while maintaining reasonable costs and necessary reliability for customers.

A New Way of Framing the Issue

As the energy and climate debate proceeds, it is commonplace to hear that systems-based approaches are needed — ones that account for the complex interactions among the various elements that serve the needs of citizens and the economy. But characteristically the conversation then turns back to individual “sectors” usually oil and gas and associated pipelines, electricity from centralized generation, or transportation.

In the past, the focus of the energy discourse at the local level has been mainly about individual building, equipment and vehicle energy efficiency. More recently it has come to encompass ideas for use of local energy sources and most recently to what extent and by what means much of future energy demand can be served solely by electricity generated by (presumably greenhouse gas neutral) sources. Smart Energy Communities involve a whole new concept beginning with an understanding (as noted above) of all local energy flows from source to end use, understanding how the basic physical structure of a community (notably land use and transportation systems) affect overall energy productivity, the potential for local sources to be integrated into the system, and an understanding that reliability is critical.

There are many ways in which other parts of the energy economy might be approached more constructively by thinking of them as systems and how those systems, in turn, connect with others.

For example, the transport sector is most often treated as a distinct set of issues but the challenges and opportunities in local transport are distinct from those in long distance systems and questions about local transport are best embedded in the concept of Smart Energy Communities. For that matter transport and the controversies it generates is to all intents and purposes an integral part of the upstream oil and gas system. Transport is often the biggest inherent challenge facing other parts of the resource economy and it will soon come to dominate the upstream electric power discussion should Canada embark on a massive increase in power production as envisioned in much of the current climate debate.

The synergies among different systems (and the challenges presented to the realization of those synergies) also present opportunities for constructive debate and real solutions. An obvious one is how the further development of the resource economy might proceed in parallel with more efficient and cleaner energy solutions for rural and remote communities.

In any event, however the problem may be approached, it is inescapable that much of the energy future is to be found in Canadian communities whether large urban, medium, small rural, remote, resource-based or Indigenous. It is in communities where Canada uses approximately 60 per cent of its energy and emits about half of its greenhouse gases.

Image 2: Community energy end use and emissions3

And a new direction

We can frame the problem around six key challenges and why the idea of Smart Energy Communities offers real solutions. While these principles are aimed specifically at how best to approach things at the community level, they are broadly applicable to the larger energy and climate debate and might help Canadians to find more common ground on several fronts:

1. Building climate change policy on a foundation of sound energy policy

Almost thirty years of no significant results on greenhouse gas management should tell us something is wrong. Part of what is wrong is that our climate aspirations stand precariously on a foundation of awareness of energy fundamentals that often range from incomplete, to wasteful and ineffective to, at worst, destructive of both public and investor confidence. Smart Energy Communities are founded on the recognition that energy consumers and citizens first value the fundamental integrity of their energy delivery systems: safe, reliable, secure, resilient and affordable. Beyond that, the evidence points to communities generally placing more weight on local environmental and social issues (impacts on air, water, land and cultural heritage) than on the abstract concept of climate.4 Canadians want climate solutions but they want them built on secure foundations and that is where Smart Energy Communities fit in.

2. Driving technological change without selecting technology winners

The objective is results, not methods. We have no way of knowing exactly what technological solutions might underlie a low emissions Canada in mid-century. We need to better understand the potential impacts of different technological solutions on utilities and other energy service providers, consumers, and investors and not only for energy use and emissions but on the fundamental resilience of energy systems facing the effects of a changing climate.

Rather than pushing for the latest technology, policy needs to emphasize accurate and complete price signals, setting performance standards, creating conditions for investment in infrastructure, and inviting both consumers and investors to choose options based on their particular conditions at a given point in time. This principle is nowhere more evident than at the community level where local conditions are almost always unique whether due to different energy efficiency options, opportunities to manage waste heat, opportunities to make assets out of local, diverse local renewable energy options, and distinctive challenges respecting system resilience. Smart Energy Communities figure this out and select what works best for them.

3. Maximizing the value of all our assets, both existing and new

Electrification is no doubt a solution in several quarters but it may not be the best and is not obviously the only one, particularly in the medium term and we are far from understanding the diverse implications of electrifying the 80 per cent or so of energy end use that now relies on other sources but we do know it will be costly.5 The established energy networks — electrical, natural gas, fuels for mobility — are with us for the foreseeable future and have many options for solid incremental improvement, especially building on the potential for diverse networks to work together. In any event, in a world where all the evidence tells us that new infrastructure will be difficult, risky and expensive, needing careful, deliberate discussion to bring citizens along and, inevitably, slow to build, we can’t afford to waste what we have. Smart Energy Communities know this and use their assets accordingly.

4. Emphasizing institutional innovation

Technological change is clearly of immense importance and Canada is doing its share to create such change in our energy systems from upstream to down. But what is missing from the technological conversation is a whole field of innovation concerned with the institutions that will oversee change and deployment of new technologies. What are the right roles for local governments? How does a regulatory system that has served us well get a lot better, in terms of who decides and how, as well as how it adapts to the new business and regulatory models that follow from the emergence of new technological options?6 How do policy makers find answers to these questions, answers which have the weight of concurring citizens standing behind them? The local level holds promise for bringing all the relevant stakeholders together in ways that make the answers more apparent and with stronger and more widespread support.

5. Reducing policy uncertainty through alignment and sense of community

There is no easy answer to the apparent political polarization which has had Canada often grasping at oversimplified but politically attractive solutions and more recently swinging back and forth as governments change. The effects of all of this have been to increase citizen cynicism, undercut investor certainty and frustrate efforts at steady change. Local energy debates emphasizing all the energy related needs of local communities while adding to climate solutions and built around a shared sense of community can offer improved prospects for civil dialogue and more stable conditions for change. Smart Energy Communities, by definition, spend less time shouting at each other and more on building the future.

6. Restoring public trust and confidence in decision making institutions

Again, this is a very large question, one that extends far beyond energy and climate and it seems wise to be realistic in our aspirations. Many people and organizations are grappling with this problem and it will not be turned around quickly or easily. Still, it seems more likely that trust and confidence will be gradually restored if citizens can see progress through decision processes that engage them and their local communities in building solutions that meet all the requirements that they demand from their energy systems. Smart Energy Communities are also more energy literate communities and more likely to be constructive contributors to the larger energy decisions that occur outside their immediate areas of responsibility.

Implications for the regulatory system

Communities offer a fundamental solution to better manage our energy use and effectively reduce greenhouse gas emissions. Over the years, this idea has gained momentum.

There are multiple opportunities to be “smart.” It starts with improving efficiency from individual buildings and equipment to whole sub-systems (neighbourhoods, building complexes, transportation systems). It ensures use of the right energy in the right place, such as avoiding wasteful use of high grade energy (electricity) in low grade applications (such as space heat) except where doing so facilitates use of local renewable sources. It understands the potential to manage waste heat and turn other waste such as from municipal landfills or industrial and agricultural operations into energy sources. It looks to the whole range of local renewable energy sources whether through rooftop solar or tapping local sources of thermal energy. And it ties it all together with integrated power, gas and heat grids.

Community energy planning is becoming a mainstream practice, most often built around basic energy and policy principles.7 Through steady effort a national community of practice has emerged, centered on local energy planning and as of 2017, an 85 per cent increase in the number of community energy plans since 2014 to over 500 plans in place today.8

Through the course of these efforts there has also emerged a diverse network of over 5000 community leaders across sectoral, provincial, and territorial boundaries.9 The process has engaged governments, regulators, utilities, land and building developers and various other community leaders. All of this provides a backdrop against which regulatory innovation can proceed.

A recently funded initiative which will be formally announced in January 2020,10 aims to support the establishment of what we call “Regulatory Innovation Sandboxes.” These aim to provide a mechanism to test new business models, programs, and technologies that don’t fit in current regulatory frameworks.

Sandboxes provide a mechanism to test new policies, programs, and technologies customized for each province, territory or local community in a controlled manner, where risks to consumers are minimized. Sandboxes will help energy stakeholders across Canada learn what works and what doesn’t, and move effectively to a lower emissions energy system. In order to adapt to a changing energy system, there is a need to incubate “niches” (policy, regulatory and business models and processes, in addition to technology) that can provide the same energy services with lower emissions and with a lower cost or at greater convenience. Once such solutions are incubated, the policy and regulatory regime can evolve with the market to absorb them and, in the process, meet current and future needs.

Canada need not spend all its time in self-flagellation about past failures or single minded emphasis on aspects of the system such as upstream oil and gas where the potential for increased regional division creates fundamental threats to constructive discourse. By more visibly advancing Smart Energy Communities — something that is well in train across the country despite the general public unawareness — Canada can contribute constructively to a much more sustainable energy future, perhaps, lower the temperature of the debate and better position Canada in international discussions. Canada is not alone in facing these challenges; many countries are exploring means to shift away from big and long-distance energy infrastructure to increase emphasis on locally-created solutions. If Canada can demonstrate its own capacity to develop such solutions, its leadership could be of help to other countries where there are numerous barriers to big energy infrastructure and there is a need to find more practical and cost-effective local solutions.

  1. Canada, Generation Energy Council, Canada’s Energy Transition: Getting to our Energy Future Together (Report) (June 2018), online: <>.
  2. The community energy flows Sankey diagram was developed for the Town of Oakville as a visual representation of their energy sources, energy end-use and wasted energy. It was developed as a baseline to help them understand what the potential impact could be of their Community Energy Plan on energy use, emissions and energy costs. Reproduced with permission from the Town of Oakville.
  3. Canada, Natural Resources Canada, Comprehensive Energy Use Database, online: <>.
  4. M. Cleland et al., “A Matter of Trust, The Role of Communities in Energy Decision Making” (November 2016), Positive Energy, University of Ottawa, online: <>.
  5. “Implications of Policy-Driven Electrification in Canada” (October 2019), Canadian Gas Association, online: <>.
  6. Michael Cleland and Monica Gattinger, “Canada’s Energy Future in an Age of Climate Change: Public Confidence and Institutional Foundations for Change” Energy Regulation Quarterly, 7:3 (October 2019), online: <>.
  7. “Principles for Smart Energy Communities” (2009) QUEST, online: <>.
  8. “National Report on Community Energy Plan Implementation” (2017) QUEST, online: <>.
  9. “Our Smart Energy Impact” (2019) QUEST, online: <>.
  10. The ‘Energy Regulatory Innovation Sandboxes’ is a joint initiative between Pollution Probe and QUEST which will be formally announced January 2020.

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